Developing Batam :Indonesian political economy under the new order

Abstract

Since Batain Island was targeted for development by Soeharto's New Order government in the late-1960s, it has undergone a significant transformation, physically, economically and politically. This study describes and analyses that transformation. Whilst the results of development on Batam Island before 1988 were quite limited, and highly reliant on the oil industry, changes to the investment regime in 1989, as well as other reforms, has brought farreaching changes - a massive influx of investment and the growth of an export-oriented manufacturing sector. What was once a sparsely populated island of subsistence farmers and fishermen is today a seemingly thriving manufacturing, industrial and tourism area. Through an examination of domestic factors, such as state and non-state institutions, individuals and business, as well as external factors such as international economic conditions and foreign capital, the study also considers what the experiences of developing Batam Island tell us about the policy-making processes in Indonesia, and about Indonesian political economy under the New Order in general. It is argued that Indonesian political economy is characterised by what might best be described as elite politics. Patrimonialism and the closely-connected features of patronclient relationships and intra-elite politicking have consistently dominated the policymaking processes under the New Order government presided over by President Soeharto. This is not to deny the existence of other influences. Indonesian societal groups have demonstrated that they can have policy input. Likewise, external variables have affected the policy environment However, whilst societal influences are not a major constraint on the Indonesian state's policy-makers, it is recognised that policy-making is not confined simply to actors within the state apparatus. In tracing Batam's development, various political and economic interactions become apparent - between domestic and international variables, between public and private interests, between state and civil society, and within the state itself - illustrating that while the main focus of studies of Indonesian political economy should be on the state, nonstate influences must also be analysed in order to explain how political and economic actions in Indonesia are best understood.